This morning I heard the news (as predicted by Dizzy) that 5000 jobs in the city will be lost thanks to the collapse of Lehmann Brothers. Wall Street are going crazy. Talk of recession is off the charts. What really gets to me, though, is the explanation we keep seeing in the media for all these problems. In a nutshell:
It’s because of the Credit Crunch.
It’s all because of the ‘Credit Crunch’. It’s out of our hands. Beyond our control. The Credit Crunch is causing it. Thou must be silent in admiration of the Credit Crunch and all it’s awesome power.
Let’s have a quick game of honesty. For every instance of the words ‘because of the Credit Crunch’ in a news report, let’s substitute ‘because we, the financial companies, have been borrowing more than we can afford for so long that we imagined it was good business practice’.
The thing is, the ‘Credit Crunch’ is causing all manner of problems, but it’s becoming a convenient scapegoat for any company that has taken on more risk than they ought to have done. By a curious piece of circular logic, the problems these companies are facing now are not their fault – they’re ‘because of the credit crunch’. This leaves out that it was their risk-happy high-borrowing practices (egged on by the Governments of Britain and the US, incidentally) that have led to credit becoming devalued and tightened in the first place.
Naturally I have sympathy for those who are losing their jobs, and I worry about the future with a recession coming in and house prices crashing, but the current financial crisis has been caused by these companies.
They are not the hard done to victims, they are the instigators of their own woes and it’s not up to us to save them.
It’s been far too easy to borrow expensive money for the average family. In a previous era it was called paying on tick, or on the never-never, meaning zero savings for the most vulnerable.
Not much has changed except the re-branding of credit and the numbers of those who want everything now. This is a legacy of the US and our gvt’s – please keep on spending, except there’s no more tick now.
Somewhat similar applies to brokers such as Lehman Bros except for the obscene amounts taken out by their top execs (albeit a fair proportion was paid in shares).
Yes, the UK will go into a mild recession, jobs will continue to be lost, inflation will creep up. I don’t approve of the way the City is ‘regulated’ and we’ll have to see how far the £ will be allowed to fall before new regs come in. This may have a knock-on effect in the international confidence of the City, and requires a deft touch to get the balance right.
Meanwhile, I can assure you a lot is going on in the background from micro businesses and SMEs to ensure they and their employees are staying afloat. Yeah – the ones who get sod all from this gvt and have been screwed over.
Support your local traders!
Tizzy
September 16, 2008 at 4:49 pm